Final answer:
Option b is the correct answer.An appropriate inflation target above zero helps maintain a balance between managing unemployment and preventing the wage-price spiral that can result from striving for zero percent unemployment. It allows for flexible wage adjustments and guards against deflation.
Step-by-step explanation:
If inflation is generally undesirable, why do policymakers choose inflation targets that are greater than zero? The most appropriate answer to this question is b. Zero inflation is too costly in terms of unemployment. Higher inflation can be accommodated in the short-term to manage unemployment rates. Policymakers believe that an overly strict focus on achieving zero percent inflation can potentially push unemployment rates beneath the natural rate, leading to wage inflation and creating a cycle where inflation is pushed higher without improving unemployment in the long term.
Moreover, moderate levels of inflation allow for relative price adjustments without requiring nominal wage cuts, which are often unpalatable both economically and socially. Additionally, a small amount of inflation can provide a buffer against deflation, which can lead to decreased consumer spending and further economic downturns. Thus, while high-income economies have both the consensus and tools to keep inflation low, they target inflation rates above zero to maintain a healthy balance between inflation and employment.